Head NV Gets Q1 Boost from Racquet Sales Gain; Economy Hurts Diving Biz…

Head attributes the increases to improved racquet sales and a slight pick-up in the winter sports category. In contrast, company revenues were slightly offset by a decline in diving which Head attributed to the overall decline in the economic environment and consumer spending, as well as product availability issues from a third party supplier.

 

Currently, the company’s three segments are reacting in accordance to the overall first quarter success. 

 

In Winter Sports, Head is anticipating results comparable to the positive numbers displayed in the first quarter, however, the company is remaining cautious with concern to the fragile state of the economy.

 

Accordingly, based on the forecasted demand for merchandise, Head expects that sales will be broadly in line with recent results, which saw winter sports grow slightly, up 0.6% to €14.0 million ($19 mm) in the first quarter.  The company said sales this past winter season were driven in part by the success of Head sponsored athletes at the winter Olympics in Vancouver. 

 

In a release, Head said that based on pre-season bookings they believe that winter sport sales will be “broadly in line” with last season.

Following declines in 2009, the company is seeing an upswing in results for the tennis market which helped boost Racquet Sports sales up 14.4% to €35.7 million ($49 mm) from €31.2 million ($41 mm ) in the year-ago period.  This increase was due to higher sales volumes for racquets and tennis balls as well as improved product mix of racquets, partially offset by the effect of the stronger euro against the U.S. dollar during the reported period.

 

The Diving category took a small dip, dropping 4.5% in the quarter.

 

The company, along with its subsidiaries is seeing varying trends in terms of market share throughout various regions.  In a company statement, Head maintained that, “Mares gained market share in its key European markets, of Germany, France and Spain as a result of innovative product launches and improved operations. The Mares business was most severely impacted in the U.S. with a decline of over 20% in sales. Asian countries developed differently, and were in total slightly down, with Korea up both in sales and market share, while Australia worsened due to distribution weaknesses.”

 

Licensing revenues also decreased 6.4%, to €1.4 million ($1.9 mm), from €1.5 million ($2 mm) in 2009.  The company attributes the decrease to fewer licensing agreements.

 

Gross margin improved to 42.9% of sales for Q1 from 38.1% of sales in Q1 2009, due to higher sales, improved product mix and manufacturing costs as well as lower sourcing costs.  SG&A decreased from 51.6% of sales in Q1 last year to 47.7% of sales Q1 this year. The adjusted operating loss for the three month period compared to prior year decreased by just over €5 million ($6.9 mm) driven by higher sales and improved gross margin.

 

The company generated 35.6% of sales in Austria and 31.2% in North America.  Italy was 13.2% of sales and the rest of Europe was 15.4% of sales.  Asia contributed 4.6% of sales.